Editor’s Note: this article is excerpted from the March 2013 issue of RealtyTrac’s award-winning newsletter, the Foreclosure News Report.
Greg Fallacara is feeling squeezed.
The Fort Myers, Fla., investor said he’s being forced out of the Florida foreclosure market by all-cash buyers. He’s paying more and buying fewer properties because his offers are being outbid by all-cash Wall Street buyers. He’s finding it hard to compete with the flood of all-cash offers, with no contingencies, swooping into and snapping up properties he was bidding on.
“I’ve seen significant competition from hedge funds here in Florida,” said Fallacara, a part-time foreclosure flipper who typically quick-turns five or six properties a year. “Now I’m only flipping two or four properties a year. They’re driving up prices. I can’t compete with the deep-pocket investors.”
The rental housing business, long dominated by local mom-and pop investors like Fallacara, has morphed into one of the trendiest investments on Wall Street. Dozens of large regional real estate investment firms and national private equity companies such as Blackstone Group, Colony Capital and American Residential Properties, are rushing into the foreclosure landscape, purchasing thousands of properties for all-cash.
In January, Florida had nearly 30,000 properties with a foreclosure filing — the most of any state — and dozens of investment firms have descended on the state to scoop them up. Companies backed by Blackstone bought 199 Florida properties in some stage of foreclosure last year, according to RealtyTrac data. Various LLC companies that appear to be created by American Homes 4 Rent purchased 340 Florida homes in some stage of foreclosure during the year. Another big foreclosure buyer was West Florida Wholesale Properties LLC, which purchased 162 homes in some stage of foreclosure during the year, the vast majority (153) in Hillsborough County — the largest county in the Tampa Bay metropolitan area.
Many smaller investors in hard-hit markets like Arizona, California, Florida and Nevada can’t compete with a flood of all cash offers from well-heeled Wall Street war chests. Last year, through October, bulk buyers snapped up 39,423 foreclosure properties nationwide representing 5 percent of all foreclosure- related sales, according to RealtyTrac.
In Florida, the 5,289 foreclosure purchases in 2012 by buyers who purchased at least10 foreclosure properties nationwide during the year also represented about 5 percent of all foreclosure sales. However, that number could grow in 2013 as bulk buyers scramble to find markets with more foreclosure inventory available.